Jack in the Box Inc. (NASDAQ:JACK) Q4 2022 Earnings Call Transcript

Darin Harris: Yeah. Hi, Lauren. Yeah. Related to growth, I mean, we have been building the pipeline. We have approved more sites than we have in the prior 18 months just in 2023 or 2022 alone. As you know, we have signed substantial number of development agreements with 68 for 267 stores. So we have — the pipeline is filling and that’s the biggest thing for us to be able to generate net unit growth. And so as we keep filling up the top of the pipeline, we are also filling up the site pipeline that enables us to look into visibility for future growth and we are seeing that. It also allows us to mitigate some of the things that move, whether it’s permitting, whether it’s equipment, all those things that happen within a pipeline naturally, it enables us to get in front of that and start to mitigate that challenge.

And so as we have seen we have changed our process, so from the minute someone approved the site, they are already starting to order their equipment. So we are getting way out in front of it versus typically that handles in the later part of the process. So that’s one thing. And then from a closure standpoint, part of the work that we did over the last couple of years and in 2022 was closing and accelerating some closures that needed to close, because they were underperforming units. So we don’t anticipate closings at the same rate that we have had over the last three years.

Operator: Your next question is from the line of Dennis Geiger with UBS. Your line is open.

Dennis Geiger: Great. Thank you. I am wondering if you guys could talk a little bit more about some of the opportunities you have at Jack on the restaurant margin expansion. Darin, I think you spoke to good progress against some of the more immediate opportunities to drive some of the 200 bps of improvement, which then I believe will kind of filter on the franchisees for an opportunity there. Just if there’s anything more on kind of the timeline there or maybe what inning we are in on that opportunity. Just kind of framing up some of the expansion opportunities that, if you could add a little bit more there? Thank you.

Darin Harris: Yeah. We worked in the last half of 2022 with our margin task force to identify and invested in some resources related to this margin task force internally to really focus on equipment, training and process, and technology to drive out cost. We now have a clear line of sight and math to get there. A lot of these investments and cost savings will start to take hold in the last half of the year, really the fourth quarter and on. And it involves things like I mentioned cheese pumps, which reduced waste and Hydro-Rents in our shake machines. Some of those are just not, by the time, we get the equipment installed it’s later in the year. A simple things as reducing our receipt that saves almost $400,000 for the system.

So we are looking at every little line item to try to find where can we improve and a lot of those will take hold and it’s a clear plan that we had to execute that will take hold. Well, we don’t want to do is, not improve the guest experience. We want to make sure that we do improve the guest experience or upgrade quality as we make any of these changes. And so, I mentioned that, because we also have made some spec changes and the size of our chicken product and some other products that have overall improved the quality for our guests. And then the last is our pricing discipline. We have improved our pricing discipline with additional technology and tools, from a competitive set, where we can start to be more intelligent about how we price every unit, every market, by franchisee and give them guidance around a range of pricing, where we think there’s opportunities.